Dispatch special report: Power prices poles apart

Sunday

Apr 7, 2013 at 12:01 AMApr 7, 2013 at 12:43 PM

CELINA, Ohio - A household in this city along the shores of Grand Lake St. Marys pays about $91 for the same amount of electricity that costs about $153 in rural parts of Butler County, about 80 miles south. The gap is the result of an Ohio electricity system whose inequity is stark but whose details are not widely known or understood.

Dan Gearino, The Columbus Dispatch

CELINA, Ohio — A household in this city along the shores of Grand Lake St. Marys pays about $91 for the same amount of electricity that costs about $153 in rural parts of Butler County, about 80 miles south.

The gap is the result of an Ohio electricity system whose inequity is stark but whose details are not widely known or understood.

Among the 52 largest electricity utilities, Celina, in northwestern Ohio, has the lowest rates; several rural electricity cooperatives are among the highest. This is based on a comparison of the total bill for a house using 1,000 kilowatt-hours in January.

In central Ohio, Westerville’s city-owned utility has the lowest rates and Dayton Power & Light has the highest.

The Dispatch obtained rate information for electricity utilities that together serve 98 percent of the state’s households, showing who pays the most, who pays the least and whose costs have been the most volatile. The list is a snapshot of a time when clean-air rules are making it more expensive to turn on the lights and when deregulation is making prices less predictable.

Find and compare your rate to others around the state

With few exceptions, the consumers interviewed for this story were unaware of how their rates compared with others’. They lacked the information that would help them ask informed questions of utility managers.

In some parts of Ohio, people on the same road can experience drastic price differences. For example, the area just west of Celina is served by DP&L, which has a standard rate that is 60 percent more expensive than the one in Celina.

But even people with low rates feel a sting when they write that check each month.

“We’re just like everyone else,” said Dennis Howick, a farmer served by Celina’s utility. He was eating lunch at the Fountain Restaurant, just off Main Street. “We groan and gripe when we get a big electric bill.”

Many utility executives were wary of disclosing their rates for this story. They said the cost of service is closely tied to terrain and usage patterns that cannot be explained by one number. After repeated inquiries, all utilities with at least 4,000 households provided the information, except one: Hancock-Wood Electric Cooperative in the northwestern part of the state.

Bernadette Unger, a yoga teacher in Butler County, did not know her utility is among the most expensive. But she gives Butler Rural Electric Cooperative high marks for customer service. It serves 10,833 households in a territory northwest of Cincinnati.

“I think they do a great job for me,” she said. “They’re very personable.”

High rates can act as a damper on the local economy and discourage businesses from moving to an area, said Sam Randazzo, attorney for Industrial Energy Users-Ohio.

“For a large steel manufacturer, a 10th of a cent of a difference in the (electricity rate) can be a million dollars or more per year,” he said. “So when you see the range of rates, minor differences can cause people to make extraordinary selections.”

While businesses do their homework before picking a location, residents often have little understanding of their rates.

“Nobody pays attention” to the details of electricity rates, said Jim Lazar, an electricity consultant in Washington state who does work across the country. “The electric bill is not a big part of people’s lives.”

And yet, the costs add up to some big numbers. Ohio residents spent $6.1 billion on home electricity in 2012, according to the Energy Information Administration.

Is it fair that some households pay so much more than others?

“Questions of equity are best posed to priests, philosophers and politicians,” Lazar said, later adding, “It certainly seems unfair.”

There is no easy way to change the situation if you are served by a utility that has high rates or unresponsive service.

In Boulder, Colo., voters have approved forming a city-owned utility, and officials are researching whether this would be financially feasible, according to the city’s website. Supporters of the switch want more local control and more use of renewable energy, among other changes.

The opposite is happening in Vero Beach, Fla., where residents voted this month to sell the city’s electricity utility to Florida Power & Light. This is largely a response to high city rates, according to local media reports.

There is nothing quite like either situation in Ohio.

The big guys

About 80 percent of the state’s households are served by four investor-owned companies: American Electric Power, FirstEnergy, Duke Energy and DP&L. In this group, DP&L and AEP have the highest rates.

For AEP, this is a contrast from a decade ago when the Columbus-based utility had some of the lowest rates in the state and country. Prices have risen because of environmental rules, maintenance costs and a series of new charges approved by the Public Utilities Commission of Ohio.

FirstEnergy and Duke customers have seen their bills decrease in recent years because the companies adopted rates that are tied to the market price of electricity and the market price has been low. AEP and DP&L have both begun a multiyear transition to market prices.

One caveat on prices from investor-owned utilities: Their customers can choose a supplier for the electricity generation portion of the bill, which can lead to possible savings off of the standard prices listed here. The standard price is the one you receive if you do not choose a different supplier.

Before Duke’s standard price dropped, it had risen steadily for several years. This combination of ups and downs made Duke’s prices the most-volatile in the state from 2005 to 2011, varying by an average of about 10 percent each year, based on an analysis of Energy Information Administration data. The least volatile has been Cleveland’s city-owned utility, which varied an average of less than 1 percent.

Beyond the large, publicly traded companies is a diverse group of smaller utilities. They fall into two categories:

Rural electricity cooperatives: These nonprofit, member-owned companies came together decades ago to provide electricity to rural areas that the investor-owned utilities didn’t want to serve, and now they account for about 10 percent of the state’s households. They have the lowest population density and some of the highest rates.

Municipal utilities: About 10 percent of households live in a city or village where the electric utility is owned by the local government. Publicly owned utilities have some of the lowest rates because they have the highest density and no need to pay dividends to shareholders.

The smaller utilities are not regulated by the state. If you have a complaint, you need to go to your city council or the rural electricity-cooperative management. At the same time, a smaller utility often has more personal service, customers say. If you’re upset about something, it’s easy to get the mayor or CEO on the phone.

How we got here

A map of Ohio electricity-utility service territories looks like a collection of paint splatters. Most of the companies serve noncontiguous areas, with islands of customers connected by power lines that run through a different utility’s territory.

The boundaries are the result of more than a century of development and mergers. Publicly traded companies spread out to cover the largest cities, which were the most profitable to serve. To connect the cities, the companies also covered some of the rural areas in between.

“It’s no different from drawing political lines, really, like gerrymandering,” said David Bellman, an independent energy analyst based in Columbus.

Many local governments started nonprofit electricity companies that served customers only within the municipal borders.

While urban areas received electricity, most of the state’s rural territory remained in the dark because it was the least profitable to serve. This began to change with the Depression-area Rural Electrification Act. Farmers used federal aid to set up member-owned cooperatives to provide the service.

“We’re serving the areas nobody else would serve 75 years ago,” said John Metcalf, CEO of Mid-Ohio Energy Cooperative in Kenton. “When we came into existence, only 10 percent of the farms had power.”

The state has a total of 115 electricity utilities. Those not included in this report are all small municipal or cooperative utilities — down to the smallest, the village of Custar, southwest of Bowling Green, which had 104 households in 2011.

Looking across the country, the states with the fewest utilities tend to be dominated by a few investor-owned companies, and those with the most utilities have a high number of city-owned providers.

In Washington, D.C., everyone is served by the same company. In Iowa, the heartland of municipal utilities, there are 182 providers. Texas has the most utilities, with 200, but its system is unique because it puts unregulated power companies on the same list as utilities.

Columbus’ municipal utility, which serves more than 9,300 households, mostly in the city’s older neighborhoods, is the state’s most-expensive municipal system at an average $119.50 a month. Looking at the full list of Ohio electricity utilities, though, Columbus is right below the median, which is about $120. Columbus is also less expensive than the standard rate for AEP, the utility that serves most households in the city.

Most of Ohio’s municipal utilities are members of American Municipal Power, a Columbus-based company that manages energy purchases. AMP encouraged its members to buy shares in several new power plants, including the Prairie State Energy Campus in southwestern Illinois. The project has suffered mechanical problems and budget overruns. They could contribute to future rate increases in the communities that bought into it, including Galion, Cleveland, Hamilton and dozens of others. Columbus’ and Westerville’s utilities did not buy into the plant.

Celina, which owns a small share of Prairie State, has kept its rates low by carefully managing its expenses and because it has a large industrial base for a city its size, said Mayor Jeffrey Hazel. But he gets more complaints about rates than pats on the back.

“The majority of people, just by human nature, don’t look outside themselves,” he said. “It would be rare for someone from Celina to go outside the city to see what other people pay.”